Saturday, September 26, 2009

I Will Follow

I live in Maine. I was an English major. I never worked on Wall Street.

Look, there are a dozen reasons why I should fail. The odds are stacked against me. I've been trading for 3 years with limited success. But I have begun to turn the corner a bit this year. But naturally, everyone is up huge in 2009 so chances are, I'm not actually doing anything special.

Nonetheless, I'm going to tell you my secret strategy that has helped me improve my performance this year. There were two big steps:

1) I admit I know very little about small cap investing.
2) I am willing to follow those who do know more than I.

So what I have done this year is change my perspective. Being a lonely trader in Maine means I'm at a big disadvantage. But what if I could hire, say, an unlimited number of analysts, pay them nothing, and have them constantly feeding me their best ideas every single day of the week?

Well, I can.

I am now fully harnessing the power of the Internet by following the "best of breed" investors via the world of social networking. Each day I browse through the discussion boards at Yahoo, I-hub, and Twitter, paying close attention to those people who I have flagged for their past picks. I then do my own cursory study of recent filings, and finally, consult the ultimate partner - the charts - to determine if I should follow along.

Now I know most of you probably do the same thing, but honestly, I've never seen anyone so blatantly admit that their entire strategy is based on following other people's ideas. Especially people I don't know personally. Many traders have big egos. They want to be in control of their lives. They don't want to have bosses. They certainly don't want to be followers.

I will follow.

Of course, I am still the boss. Look, I have to sift through dozens of ideas each day. I have to decide what to buy, how much to buy, when to sell and when to add more. I'm still working on those aspects of money management. (For the most part, I tend to allocate around 5 - 10% of my portfolio to anyone one idea. I usually hold no more than 15 positions at any one time. I almost always seem to be holding around 20% cash or more.)

But for the most part now, 95% of my picks come from the 'net.

What have I come up with recently? (next blog)

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